Dealing With Problem Directors

Last year, when Sumner Redstone removed nearly half of Viacom’s board, including the company’s CEO, the five ousted directors cried foul, filing suit in Delaware to reverse the action. They accused Redstone’s daughter, Shari, of taking advantage of her father’s diminishing mental competency to wrest control of the media empire.

They may have been right. But Wall Street appeared pleased with the move, sending the stock up 6.8 percent on the news. In the end, the dismissed directors had little recourse: Viacom’s corporate charter gave Redstone’s closely held company, National Amusements, the power to remove any of Viacom’s board members at will.

For the vast majority of public company boards, it’s a challenge to fire one director, let alone five. Yet there are plenty of ways that a director, who looked perfect on paper when first wooed, can prove problematic once installed, and those problems can seriously impede the success of an otherwise successful board. But if the board can diagnose the problem accurately, one or more of the other directors may be able to work with that individual to correct the problem.

“I’ll put a page somewhere in their book that says, ‘If you’ve read this, call me.’ If I don’t get a call, I know we have an opportunity for improvement.”

Here are the most common types of difficult directors, and ways to handle them.

The Unengaged Director. This typically takes two forms. The first is the fellow who repeatedly misses meetings due to last-minute scheduling conflicts. It may be legitimate; if the director is a sitting CEO, absenteeism may indicate he has too much on his plate to serve. “That’s really the easiest one to fix,” says Jerre Stead, chairman and CEO of IHS Markit. “Either they can change that or they can’t.”

In the second case, the director is often unprepared and has not read the materials, though they were sent well in advance. “This is the one that drives me bonkers,” says Stead, adding that he has a way of finding out if a board director, who he suspects is not doing their reading, really isn’t. “I’ll put a page somewhere in their book that says, ‘If you’ve read this, call me.’ If I don’t get a call, I know we have an opportunity for improvement.” Bottom line: the director needs a reminder about the importance of preparedness, which will often clear up the problem.

Sometimes, a quiet director can be misdiagnosed as unprepared. When Clare Hart, CEO of Sterling Talent Solutions, notices a director isn’t speaking up, she will call to engage him or her in a one-on-one conversation about the business strategy. “It’s frustrating that they don’t speak up in the meeting, but I make sure there’s a good dialogue offline, because they might be quiet in the meeting with others, but one-on-one, they’ll share their views.”

The Naysayer. There’s no question that, in terms of liability, the stakes for board members have risen in recent years. Many outside directors see it as their primary function to rein in the potential overconfidence of management. Caution can be an asset—to a point. Stead recalls an experience on a board when the company was going through a difficult time and decisions had to be made. A board member who had once been a good contributor became so preoccupied with his own potential legal liability and negative image in the press, he became a liability himself. “I had to sit him down three times and finally just said, ‘This is just going to be better for all of us, including you, if you just go away.’ That was a tough one, because that was a person who evolved from being a good director to a not very good one.”

Another board Stead served on had elected a director specifically because he had governance expertise. But the hire backfired. “Every move the board would make, a hand would go up and say, ‘I don’t think you can do this,’” he recalls. “The chemistry just didn’t fit. We let the person know they wouldn’t be nominated again.”

The Chemistry Mismatch. As in the above example, a director may seem like a perfect fit, in background, skills, and outward temperament, but in practice, does not mesh well with the rest of the group. And when the director is particularly vocal, this becomes apparent right away. Stuart R. Levine, who has served on multiple boards and runs a leadership consulting firm, recalls an experience as lead director of a large Nasdaq company. One of the board members had a persistently negative attitude and if the topic were about, say, a national product rollout, this director would force the conversation deep into the weeds on potential problems in one specific location. “It looked and felt like a very myopic view, a tactical view, when we wanted to be talking about strategy, about capital deployment, return on investment, and so forth,” says Levine. “It was distracting the CEO, it was distracting the board.” The company hired an outside consultant to evaluate and that director, entrenched in his perspective, ultimately had to go.

When a director focuses more on managing than governing, the atmosphere can grow toxic. “There’s a great saying that one of my directors uses which is ‘nose in, fingers out,’” says Bonnie Gwin, vice chairman and co-managing partner of Heidrick & Struggles’ global CEO & Board Practice. “Some people want to get in there and drive the bus as opposed to asking the right questions, thinking strategically, and helping work on the big picture issues.”

Others are simply stubborn, digging in their heels on a point of view and refusing to let the conversation move on. “There can and should be strong debate and differing views. But once you’ve reached a conclusion, it’s time to move on,” says Betsy Atkins, founder and CEO of Baja Ventures and board member at Cognizant, Home Depot Supply, and Schneider Electric. If a director cannot let go of their point even after the board has reached consensus, that becomes very disruptive, she adds. “Because the board has major issues in front of them—do we make this big acquisition? Do we divest this big business unit? Do we sell the company? These are momentous decisions, and you can’t have somebody who freezes the board’s ability to make a decision,” she says. “That’s very hard to remediate, in my experience.”

The ability to listen well, to move on, to read a room—these are all challenging to predict at the recruiting stage. “Evaluating culture fit is an art, not a science,” says Gwin. But when a board member seems to be a wrong fit, or can’t seem to get in sync with the board’s culture, that needs to be dealt with swiftly, says Levine. “Board culture sets the tone for the entire corporation. So maintaining a focused and respectful board culture is hugely important to the company, the shareholders and employees.”

Sidebar: Acting on Activism

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CJ Prince
CJ Prince is a professional business writer from the greater New York City area who writes for Chief Executive magazine and Corporate Board Member magazine, among other publications.